I have an LLC (taxed as a partnership) in which I own 90%. The LLC operates a shopping center. Income is $800k, expenses (including standard depreciation) are $600k and net income is $200k.
I am using turbo tax business software. I invested approximately $110k in HVAC and fire sprinkler improvements in 2020, which should be eligible for a 179 deduction. However, when I enter this information, the software tells me that i don't have enough business income to use the deduction and limits me to $792 (no idea where this numbers comes from - all income comes from rental real estate - except maybe $50 or so in interest income).
The shopping center is an active trade or business. I assume that turbotax is limiting the deduction because it's treating the $200k in net income as passive and not from an active trade of business. I've looked everywhere and can't find where I can check this in the software. I don't see any questions asking whether the rental income is coming from an active trade or business or factor related questions. Does anyone know how I might be able to check this?
As an aside, I've been reading on tax treatment of rental real estate and the consensus from professional publications is that real estate income can be from an "active trade of business" such that it qualifies for QBI and Section 179 deductions, but not deemed "earned income" subjecting it to self-employment income as with a classification of "real estate professional" or services provided to tenants that would make the income derived from services (check-in/out, air bnb type service, etc). Thoughts from anyone on this?
